Process:
  • The value of an asset is the discounted value of the cash that it will generate.  The quality of an asset depends on the durability of that cash.  Risk is a function of both value and quality and behavioral biases create exploitable opportunities for long-term investors.
  • By using updated definitions of value and quality that are relevant to long-term investors and circumvent accounting distortions, our investment process distills starting indexes into only the most fundamentally stable and attractively valued securities.

Below are several white papers that explain the reasoning behind Distillate’s methodology.  Additional papers can be found on our Insights page.

Accounting for Value in a Changed Economy
The composition of the economy and stock market has shifted from physical assets to intellectual ones. This change has significant implications for traditional valuation metrics, requiring a new approach.
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Behavioral Biases
Deeply rooted behavioral biases can offer exploitable opportunities for a thoughtfully designed, systematic investment approach.
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Risk: Fundamentals Over Price Volatility
Investors should consider investment risk as defined by an investment’s fundamental stability, level of indebtedness, and valuation, rather than simply its short-term price volatility.
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